Graf Industrial Corporation *
PROPOSED BUSINESS COMBINATION: Velodyne Lidar, Inc.
ESTIMATED CURRENT FUNDS in TRUST: $117.3 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.24*
ENTERPRISE VALUE: $1.6 billion
*SPACInsider estimate a/o 9-26-20
Graf Industrial Corp. proposes to combine with Velodyne Lidar, Inc., a developer of lidar technology.
Velodyne is headquartered in San Jose, CA. The Company began developing the lidar technology in 2005 as part of Velodyne Acoustics, founded by David Hall in 1983. In 2015, Velodyne became independent from Velodyne Acoustics and focused on the development of lidar technology. Today, Velodyne offers a high-performance product line with a broad range of sensing solutions, including the cost-effective Puck™, the versatile Ultra Puck™, the autonomy-advancing Alpha Prime™, the ADAS-optimized Velarray™ and the software for driver assistance, Vella™.
Velodyne has added to its portfolio the Vella software which will enable multiple new markets and applications. Vella software combined with lidar from the Vela family will provide a higher degree of accuracy and safety to vehicle systems that incrementally address SAE’s Levels of Driving Automation 1-5, to avoid collisions, avoid pedestrians and make roadways safer. Vella software will additionally be sold for applications in new markets which require precise perception such as those for security, robotic delivery and smart city.
Velodyne has served more than 300 customers including nearly all of the leading global automotive original equipment manufacturers (“OEMs”). It has booked over $500 million in revenues since its inception. Estimated revenues under existing customer contracts are expected to exceed $800 million from 2020 to 2024. Velodyne is expected to generate revenues of approximately $100 million in 2020, increasing to approximately $680 million in 2024 with existing contracts expected to drive just under 50% of the estimated 2024 revenues. EBITDA and free cash flow are expected to be positive in 2022.
Current Velodyne shareholders, including David Hall and strategic investors Ford, Baidu, Inc., Nikon Corporation and Hyundai Mobis, will retain an equity interest of more than 80% in the combined company. Upon the closing of the transaction, GRAF will be renamed “Velodyne Lidar, Inc.” and will remain NYSE-listed under the new ticker symbol VLDR.
SUBSEQUENT EVENTS – 8-K August 21, 2020
- The Maximum Share Consideration will be decreased by the number of shares of Company common stock that would have been issued to Velodyne equity holders pursuant to the Merger Agreement, but who instead opt to have their respective Velodyne shares repurchased by Velodyne for cash in a tender offer (the “Pre-Closing Velodyne Tender Offer”), which is expected to be consummated prior to the Closing.
- The Pre-Closing Velodyne Tender Offer will have an aggregate purchase price of up to $50,000,000 in cash (the “Maximum Tender Consideration”),
- Under the terms of the Pre-Closing Velodyne Tender Offer, Velodyne will repurchase and cancel shares of the holders of Velodyne common and preferred stock who accept Velodyne’s offer to exchange their shares for a per share amount of cash equal to $10.25 times the number of shares of Company common stock that would have been issued as merger consideration in respect of such shares.
- The cash consideration with respect to the Pre-Closing Velodyne Tender Offer (up to the Maximum Tender Consideration) will be payable concurrently with or immediately following the Closing.
- If a total of $50,000,000 of shares of Velodyne common and preferred stock are repurchased in the Pre-Closing Velodyne Tender Offer, the merger consideration will be 145,575,763 shares of Company common stock, including
- (1) shares issuable in respect of vested equity awards of Velodyne, and
- (2) up to 2,000,000 shares of Company common stock earned due to the satisfaction of the Earnout Condition (as defined below), including the Earnout RSUs, which are subject to vesting and will not be legally issued and outstanding at Closing.
- The Earnout was achieved on July 30, 2020, after the closing trading price of our common stock was greater than or equal to $15.00 for any 20 trading days within any 30 trading-day period, commencing on the date of the Merger Agreement (the “Earnout Condition”).
TRANSACTION SUMMARY
The transaction will be funded by:
- Issuance of approximately $1.5 billion in new common stock of GRAF to current holders of Velodyne securities (“Velodyne Holders”) (rollover equity);
- Cash from the GRAF trust account (up to approximately $117 million); and
- Cash from a $150 million PIPE at $10.00 per share from a broad group of new institutional investors, as well as certain of GRAF’s existing shareholders.
Following the transaction and after payment of transaction expenses, Velodyne is expected to add approximately $190 million of cash to its balance sheet and up to $50 million of total cash consideration will be paid to existing Velodyne shareholders.
Assuming no redemptions of GRAF public shares, Velodyne’s existing shareholders will hold approximately 83% of the issued and outstanding shares of common stock immediately following the closing of the business combination.
The GRAF Founder Group will retain 2,300,000 founder shares at closing. In the event the closing price of the common stock of the combined company on the NYSE is at least $15.00 for 20 days of any 30-day period from the date hereof through the date that is six months after the closing of the merger, two million additional shares of the combined company’s stock will be issued to Velodyne holders as incremental transaction consideration and the GRAF Sponsor will retain an incremental 275,000 shares.
- The GRAF Sponsor will forfeit all of its approximately 14.2 million private placement warrants for no consideration at closing.
PIPE
- $150 million PIPE at $10.00 per share from a broad group of new institutional investors
FOUNDER SHARES & PRIVATE PLACEMENT WARRANTS
At IPO, GRAF held 6,094,128 Founder Shares and 14,150,604 private placement warrants, purchased at $0.50
- The GRAF Founder Group will retain 2,300,000 founder shares at closing.
- In the event the closing price of the common stock of the combined company on the NYSE is at least $15.00 for 20 days of any 30-day period from the date hereof through the date that is six months after the closing of the merger, two million additional shares of the combined company’s stock will be issued to Velodyne holders as incremental transaction consideration
- The GRAF Sponsor will retain an incremental 275,000 shares.
- The GRAF Sponsor will forfeit all of its approximately 14.2 million private placement warrants for no consideration at closing.
NOTABLE CONDITIONS TO CLOSING
- At least $200 million in cash available from the PIPE and GRAF’s trust account, of which at least $50 million is cash remaining in GRAF’s trust account.
NOTABLE CONDITIONS TO TERMINATION
- A termination by Velodyne in connection with accepting a Superior Proposal would result in the payment of a termination fee in the amount of $58,867,000.
ADVISORS
- BofA Securities is acting as exclusive financial advisor to Velodyne.
- Oppenheimer & Co. Inc. is acting as financial advisor and PIPE private placement agent to GRAF.
- Oppenheimer & Co. Inc. and EarlyBirdCapital, Inc. are acting as capital markets advisors to GRAF.
- Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP is acting as legal advisor to Velodyne.
- White & Case LLP is acting as legal advisor to GRAF.
GRAF INDUSTRIAL CORP. MANAGEMENT & BOARD
Executive Officers
James A. Graf, 54
CEO and Director
Mr. Graf has been a director of Platinum Eagle, a blank check company that is searching for a target business with which to complete a business combination, since January 2018. Mr. Graf served as the vice president, chief financial officer and treasurer of Double Eagle Acquisition Corp. from its inception in June 2015 through its business combination with Williams Scotsman, Inc. in November 2017. He served as vice president, chief financial officer, treasurer and secretary of Silver Eagle Acquisition Corp. from its inception in April 2013 through Silver Eagle’s business combination with Videocon d2h Limited (“VDTH”), and he served as vice president, chief financial officer, treasurer and secretary of Global Eagle Acquisition Corp. (“GEE”) from its inception in February 2011 to its business combination with Row 44, Inc. and Advanced Inflight Alliance AG in January 2013. He was vice chairman of Global Entertainment AG, the German entity holding GEE’s equity in AIA from 2013 to 2014 and special advisor to GEE in 2013. He served as a special advisor to VDTH from 2015 to 2016. From 2008 to 2011 Mr. Graf served as a managing director of TC Capital Ltd., an investment bank, in Singapore. From 2007 to 2008, Mr. Graf was engaged as a consultant to provide financial advisory services to Metro-Goldwyn-Mayer, Inc. In 2001, Mr. Graf founded and became chief executive officer of Praedea Solutions, Inc., an enterprise software company with operations in the United States, Malaysia and Ukraine. The assets of Praedea Solutions, Inc. were sold in 2006 to a Mergent Inc, a wholly-owned subsidiary of Xinhua Finance Ltd., and renamed Mergent Data Technology, Inc., where Mr. Graf continued to serve as Chief Executive Officer from 2006 to 2007. Praedea Solutions Inc. was renamed PSI Capital Inc., and currently serves as an investment holding company for Mr. Graf’s private investments. Mr. Graf continues to be chief executive of PSI Capital Inc. Prior to founding Praedea, Mr. Graf was a managing director at Merrill Lynch, in Singapore from 1998 to 2000 and a consultant to Merrill Lynch in 2001. From 1996 to 1998, Mr. Graf served as a director and then managing director and president of Deutsche Bank’s investment banking entity in Hong Kong, Deutsche Morgan Grenfell (Hong Kong) Ltd. From 1993 to 1996, he was a vice president at Smith Barney in Hong Kong and Los Angeles. From 1987 to 1993, Mr. Graf was an analyst and then associate at Morgan Stanley in New York, Los Angeles, Hong Kong and Singapore. Mr. Graf received a Bachelor of Arts degree from the University of Chicago in 1987.
Michael Dee, 62
President, CEO and Director
Mr. Dee was a Senior Advisor to the President for Finance of the Asian Infrastructure Investment Bank in Beijing from January to July 2016 and also served as a member of its Investment Committee. From 2010 to 2015, Mr. Dee managed various private investments, including providing advice to SeaOne Maritime Corp., a startup focused on the monetization of natural gas and gas liquids and based in Texas. Mr. Dee was Senior Managing Director?–?International of Temasek Holdings Private Limited, Singapore’s sovereign investment company, from 2008 to 2010 and also served as a senior member of its Management Committee and Investment Committee. Prior to joining Temasek, Mr. Dee worked at Morgan Stanley from 1981 to 2007 in a variety of senior positions in its capital markets, mergers and acquisitions and firm management divisions, including acting as Regional Chief Executive Officer for Southeast Asia and as Head of Morgan Stanley’s Houston office. Mr. Dee served as the regional chairman of the Houston branch of Teach For America, Inc. and as a director of the Greater Houston Partnership. He was also appointed Singapore’s Honorary Consul General in Houston. Mr. Dee received a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania in 1981.
Board of Directors
Keith W. Abell, 61
Director
Mr. Abell has been a member of the board of directors of FGL Holdings, formerly known as CF Corporation, since May 2017. Mr. Abell is the co-founder of Sungate Properties, LLC, a real estate investment company, which he co-founded in 2009 after managing private investments during 2007 and 2008. From 1994 to 2007, Mr. Abell was a co-founder of, and served in a variety of senior management roles at, GSC Group (and its predecessor, Greenwich Street Capital Partners, L.P.), an alternative asset manager. From 1990 to 1994, Mr. Abell was a managing director at Blackstone where he, among other things, founded the firm’s first Hong Kong office. From 1986 to 1990, Mr. Abell was a vice president at Goldman, Sachs & Co. where he worked in the global finance, corporate finance and mergers and acquisitions departments. Mr. Abell serves as the treasurer and as a director of the National Committee on United States-China Relations. Throughout his career, Mr. Abell has served as a director of a number of public, private and not-for-profit entities. Mr. Abell received a Bachelor of Arts degree from Brown University in 1979, an MBA from the Wharton School in 1986 and a Master of Arts degree in International Studies from the University of Pennsylvania in 1986.
Sabrina McKee, 50
Director
Ms. McKee is currently the Director of Investor Relations at Ford Motor Company (NYSE:F), which she joined in February 2017. Ms. McKee, a capital markets professional with over 20 years of experience in all aspects of the investment process, has a unique blend of sellside, buyside and corporate experience offering a comprehensive understanding of the investment process. From April 2014 to June 2016, Ms. McKee was Managing Director, Head of Equity Capital Markets at Sterne Agee CRT LLC, where she worked with public and private companies on all aspects of the capital-raising process, including special purpose acquisition companies. From 2011 to 2014, Ms. McKee worked as a Director of the Corporate Access businesses at Guggenheim Securities LLC and during 2010 she worked as an Executive Director at Morgan Stanley where she connected public and private companies to the investment community. From 2007 to 2010, Ms. McKee was Vice President at Two Sigma Investments LP, where she helped build out a successful, global, Alpha Capture business, enabling quantitative investment managers to integrate fundamental factors into quantitative stock selection models. In addition, from 2000 to 2007, Ms. McKee worked for UBS Investment Bank as an Executive Director of Equity Research Sales and Equities, from 1999 to 2000 for Schroders plc as a Senior Vice President and from 1991 to 1998 for Tucker Anthony as a Senior Vice President of Institutional Research Sales, where she covered a diverse range of large institutional investors. Ms. McKee received a Bachelor of Arts degree from William Smith College in 1989.
Kevin Starke, 50
Director
Since 2016, Mr. Starke has been a senior analyst at Owl Creek Asset Management, L.P., a credit and equity long-short hedge fund in New York City, which is an affiliate of a member of our sponsor. From 2008 until he joined Owl Creek Asset Management, L.P. in 2016, Mr. Starke was at CRT Capital, where he served as a senior analyst covering distressed and special situations, with an emphasis on complex situations and litigations. He previously worked at Weeden & Co. LP from 2005 to 2008, as a senior analyst focused on special situations, distressed and post-reorganization securities. Prior to Weeden, Mr. Starke served in a similar role at Imperial Capital LLC from 2004 to 2005. From 1999 to 2004, he was an analyst at Bear Stearns & Co., where he focused on small-cap special situations companies. Mr. Starke began his career in Asia, where he worked for several financial firms in Hong Kong, following a year in the Philippines on the Henry Luce Scholarship. Mr. Starke received a Bachelor of Arts degree from New York University in Politics in 1990 and a Master of Arts degree from Yale University in Ethics in 1992. Mr. Starke was designated as a director nominee by Owl Creek pursuant to its agreement with James A. Graf and our sponsor.